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Brean Bullish On Logitech's 'Next Leg Of This Transformation'

Brean Capital’s Ananda Baruah believes Logitech International SA (USA)LOGI “presents a unique opportunity to own an under-appreciated organically transforming company with premium brand cache at an attractive valuation.”

Baruah initiated coverage of the company with a Buy rating and price target of $30.

Attractive Valuation

The analyst considers the stock valuation attractive, given that the consensus expectations could prove to be meaningfully low for four to eight quarters, while the company had the potential to deliver double digit revenue growth and EPS growth of 15-20 percent.

September Quarter Results

Logitech is scheduled to report its September quarter results on October 25. Baruah expects the company to achieve the consensus revenue and EPS expectations of $525 million and $0.25, respectively.

The analyst also expects retail sales to grow 8 percent year-on-year in 2016 and 5 percent in 2017, driven by growth in mobile speakers, video collaboration and gaming.

Future Expectations

Logitech is also expected to expand its operating margins from to 9.3 percent in 2016 and 9.9 percent in 2017, ahead of the consensus forecasts.

“We believe that the LOGI revenue story remains under-appreciated by Street moving beyond CY16. We believe the end markets of LOGI’s portfolio, as well as LOGI’s proven history of leading in these markets, will allow LOGI to grow organically at mid-single to high single-digit vs. Street currently modeling LOGI at mid-single digit growth moving past CY16,” Baruah stated.